Budget Your Money To Become Debt Free
Alright, so you somehow stumbled upon debt and are likely thinking about how in the world to get out from beneath a mountain of debt. This situation baffles and eludes many people but the answer is much easier than the actions putting the answer in to motion. Though it is difficult to get debt free, it CAN be done and we will guide you on the journey there.
The first huge step in getting debt free is in knowing where you stand financially. Knowing where you are financially means you MUST draw up a budget. Drawing up a budget is EXTREMELY important to your success. In order to get debt free you need to know what monthly income you have coming in and what monthly expenses you have going out every month. My personal budgets take this one step further; you also must account for expenses that are certain to occur annually, such as license registrations.
You may be wondering what you may need to put into your budget. I have put together an example budget below for an average American.
Rent/Mortgage – $995
Auto Insurance – $120
Auto Loan – $395
Auto Loan #2 – $295
Life Insurance – $65
Water – $39
Electricity – $81
Garbage – $19
Natural Gas – $119
Childcare – $505+
Gasoline – $301
Groceries – $1000
Telephone – $39
Cable – $49
Internet – $51
Cell Phone – $101
Credit Card – $100
Student Loans – $101+
Total – $4385++
Looking at the finances outlined above, each item taken individually does not seem like too terrible an idea. But taken together things start to get out of hand. In the above budget we have nearly $4400 of monthly expenses, AFTER taxes. In order to BREAK EVEN on this type of personal budget you MUST be earning about $70K per year. Keep in mind this doesn’t include children’s doctor’s visits, and all the other annual crap we haven’t even addressed yet, such as enrollment fees, the vehicle expenditures such as registrations and the one off mechanical failures that can cost an arm and a leg. It’s no wonder people are up to their necks in debt. Most people don’t make $70K,$70,000 and most people have all kinds of off the wall expenditures that aren’t outlined on the above financial budget. In order to know where you can cut back, you must know what you have.
My first assignment for you folks out there going over this is to do this very first step. Make a budget and BE HONEST – it will do you no good if it is not accurate. Once we get this done we will be talking about such things as discretionary spending and debt equity. Let us get our budgets prepared so we can begin working on a plan to GET DEBT FREE!!!
Richard DFO Hijinx has an article showing you how to become debt free
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